Westwood Chemical Co., Inc. v. Kulick

• Decision Date: 21 August 1981
• Docket Number: No. 80-3098,80-3098
• Parties: WESTWOOD CHEMICAL CO., INC., Plaintiff-Appellant, v. Richard W. KULICK, Arthur Fletcher, and Lenape Chemicals, Inc., Defendants, Garry B. Curtiss and Joseph Drasner, Movants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1224

656 F.2d 1224

WESTWOOD CHEMICAL CO., INC., Plaintiff-Appellant, v. Richard W. KULICK, Arthur Fletcher, and Lenape Chemicals Inc., Defendants Garry B. Curtiss and Joseph Drasner, Movants-Appellees.

No. 80-3098.

United States Court of Appeals Sixth Circuit.

Argued April 9, 1981.

Decided Aug. 21, 1981.

Arthur I. Winard, New York City, Guren, Merritt, Sogg & Cohen, David A. Schaefer, Cleveland, Ohio, for plaintiff-appellant.

James C. Sennett, Jr., William T. Plesec, Jones, Day, Reavis & Pogue, Cleveland, Ohio, Stuart & Zavin, New York City, for movants-appellees.

Before KENNEDY and JONES, Circuit Judges, and CELEBREZZE, Senior Circuit Judge.

CORNELIA G. KENNEDY, Circuit Judge.

Westwood Chemical Company, Inc. (Westwood) appeals from an order of the District Court for the Northern District of Ohio quashing a subpoena duces tecum for discovery depositions of certain executives of Dart Industries, Inc. (Dart). The depositions were intended for use in an action pending in the federal court in New York in which Westwood seeks damages from two of its former employees, whom it accuses of conspiring with Dart to cause the termination of a profitable sales arrangement between Westwood and Dart. ¹ The District Court held that in settling claims against Dart and its executives, including a claim for wrongful termination of the sales agreement, Westwood had released any right to take discovery depositions of Dart executives and to require the production of Dart's records. Dart also asserted in the District Court, and argues here, that a decision of the United States District Court for the Central District of California, since aff'd sub nom. Dart Industries Company, Inc. v. Westwood Chemical Company, Inc., 649 F.2d 646 (9th Cir. 1980) (Anderson J., dissenting), is res judicata. In that litigation, involving interpretation of this same release, those courts held that Westwood had released its rights to all discovery from Dart and its executives and employees.

For twenty-two years prior to 1976, Westwood was the non-exclusive sales agent for certain products of Synthetic Products Company (Synthetic), a division of Dart. When Synthetic terminated the sales agreement as of August 16, 1976, Westwood gave notice that it would hold Synthetic responsible for certain commissions due. In addition, Westwood accused Synthetic of sabotage, ineptitude, price checking with competitors, conspiracy to destroy Westwood, breach of contract, and conspiring with Westwood's former employees, Richard Kulick and Arthur Fletcher. Settlement negotiations were concluded September 1, 1976 with an agreement entitled, "General Release." Under the terms of the release, Westwood received $700,000 from Dart in settlement of all claims of commissions and fees due under the parties' sales agreement and as satisfaction for all claims of Westwood against Dart, Synthetic, and the officers, agents and employees of either, resulting from the termination of the sales agreement and the conspiracy alleged to have caused the termination. The release stated that "It is understood that this release applies solely to DART INDUSTRIES, INC. and Synthetic Products and to no other party whatsoever," and again that "the consideration ... has been expressly provided for the purpose of releasing Dart Industries, Inc. and Synthetic Products Division and no one else." Dart acknowledges that this language was included to reserve Westwood's rights against its employees, Kulick and Fletcher, and that both parties expected that Westwood would bring suit against them.

Shortly thereafter Westwood indeed filed suit against Kulick and Fletcher in the Southern District of New York alleging, among other things, that they conspired with Synthetic, as well as Dart, to undermine Westwood's agreement with Synthetic, and to discourage various accounts from continuing to deal with Westwood. In pursuing discovery in that lawsuit, Westwood caused subpoenas duces tecum to be issued out of the Northern District of Ohio directing Synthetic's officers, appellees Garry B. Curtiss and Joseph Drasner, to appear as non-party witnesses for deposition upon written questions and to produce various documents. Curtiss and Drasner filed a motion to quash on July 25, 1977, on the ground that Westwood had released its right to engage in discovery against Dart, Synthetic, their officers and employees.

After the filing of the motion to quash the subpoena in the instant proceeding, but before the District Court's decision herein, the District Court for the Central District of California quashed subpoena duces tecum to Dart's executive vice president, a California resident. Westwood appealed. Initially, the Ninth Circuit affirmed in an unanimous opinion. Dart Industries Company, Inc. v. Westwood Chemical Company, Inc., 649 F.2d 646 (9th Cir. 1980). It held that "The district court's order barring discovery is to be reviewed under 'an abuse of discretion' standard," and that the District Court had not abused its discretion in quashing the subpoena. Thereafter, on April 2, 1980, the Ninth Circuit granted rehearing and withdrew this opinion and substituted one in which the majority affirmed the lower court, Judge Anderson, dissenting. In that opinion, the Ninth Circuit identified the crucial issue as the interpretation of the release agreement. The majority found that the District Court did not abuse its discretion in failing to invoke the policy favoring liberal discovery to defeat an unambiguous agreement for which Dart paid substantial consideration. It held that when Westwood gave up "any rights it has or may hereafter have by reason of a conspiracy alleged by Westwood" it gave up its right to involve Dart and Synthetic in discovery proceedings ancillary to its case against its own former employees.

It released Dart from "any rights (Westwood) had or may hereafter have by reason of a conspiracy alleged by Westwood." Additionally, we can see no reason to denigrate the use of boiler plate or stereotype language where, as here, it was used appropriately. Such language has the value of frequent usage and general understanding. Far from derogating from its meaning, we believe it enhances its clarity beyond peradventure of doubt.

Dart Industries Company, Inc. v. Westwood Chemical Company, Inc., 649 F.2d 646 (9th Cir. 1980) (emphasis original). In his dissent, Judge Anderson argued that the majority used the wrong standard to analyze the lower court's ruling. "Since the district court's order was based solely on its legal conclusions on the meaning of the agreement, its action is freely reviewable on appeal," and not limited to the standard of abuse of discretion. He pointed out that if the agreement is considered unambiguous, then it cannot be read to release Westwood's right to discovery against Dart since the agreement contains no discussion or even mention of discovery. In the absence of such discussion of discovery, the only way to read release of discovery rights into the document is by finding it ambiguous. If this is so, other evidence may be considered in determining the intent of the parties who attach different meanings to it. Judge Anderson goes on to note that although Dart knew that Westwood intended to pursue its suit against its own employees, Dart did not include a provision preventing discovery. Moreover, Dart was the principal author of the agreement, and as such it should be construed in favor of Westwood. The dissent further found the interpretation placed upon the agreement by the majority contrary to the broad and liberal policy to be accorded discovery. ²

Meanwhile, back in Ohio, the District Court granted Dart's July 25, 1977 motion to quash on November 5, 1979, more than two years after it was made. It too, held that Westwood had released its right to take discovery against Dart, Synthetic and their officers. In its order, there is a reference to the California District Court's order quashing Westwood's subpoena and denying further discovery against Dart, although res judicata is not the basis of the decision. Westwood vigorously contends that the order of the District Court in California, as affirmed by the Ninth Circuit, is not res judicata and thus it is not bound by those courts' interpretation of the release agreement. It asserts that both the Central District of California and the Northern District of Ohio had concurrent jurisdiction of discovery proceedings. Different witnesses are involved in the different jurisdictions. The Ohio proceeding was initiated earlier and thus was not an attempt by Westwood to relitigate in a subsequent action a matter fully and finally resolved between the parties in a prior action. Finally, it argues, res judicata was not raised when the motion to quash the subpoena was filed and was not the basis of the Ohio District Court's decision.

Westwood's arguments are unpersuasive. The purpose of res judicata is to promote the finality of judgments and thereby increase certainty, discourage multiple litigation, and conserve judicial resources. See Federated Department Stores, Inc. v. Moitie, --- U.S. ----, ---- - ----, 101 S.Ct. 2424, 2427-2431, 69 L.Ed.2d 103 (1981); James v. Gerber Products Co., 587 F.2d 324, 327-28 (6th Cir. 1978). A final judgment on a claim is res judicata and bars relitigation between the same parties or their privies on the same claim. See Federated Department Stores, supra, --- U.S. at ----, 101 S.Ct. at 2427; Herendeen v. Champion International Corp., 525 F.2d 130, 133 (2d Cir. 1975). It bars relitigation on every issue actually litigated or which could have been raised with respect to that claim. See James, supra, 587 F.2d at 328. To constitute a bar, there must be an identity of the causes of action that is, an identity of the facts creating the right of action and of the evidence necessary to sustain each action. See Herendeen, supra, 525 F.2d at 133-34; State Mutual Life Assurance Co. of America v. Deer...